Service Corporation 3Q: Regaining their revenue footing. . . .potential challenges ahead
Service Corporation International (SCI) reported their 3rd Quarter of 2023 financial results last week. While their cumulative 6 -month report had revenues lagging behind the 2022 comparables, the 3Q 2023 report shows revenues increasing by 2.5% over the 3Q 2022 numbers — the 2nd consecutive quarter of increased revenue comparables. SCI pulled in total revenues for the 3rd Quarter of 2023 of $ 1.00 billion as compared to revenues for 3Q2022 revenues of $977.7 million.
Probably, even more important, the 3Q 2023 report shows Operating Income for the quarter increasing at a 9.6% clip over the 2022 3rd Quarter Operating Income. Another number that tells me that SCI is finally catching up with the inflationary expenses and getting clientele to spend more is the number that their “Core” revenue per service service increased to $6,393 in 3Q 2023 as compared to $6,131 in 3Q 2022. That is a 4.3% increase in average revenue per “Core” service and further tells me that they are getting clientele to pay for the increased costs of doing business.
Here’s what SCI CEO Tom Ryan said of the report in prepared remarks from the press release, “Today we are proud to announce strong results that meaningfully grew over the prior year despite what continues to be a challenging consumer and interest rate environment. Adjusted earnings per share grew 15% over the prior year third quarter to $0.78. Gross profit grew $23 million primarily driven by higher recognized cemetery preneed revenue. . . .”
You can access the 3Q 2022 report here.
For the quarter it is somewhat remarkable that with less funeral services performed in 3Q 2023 (85,139) as compared to the number performed in 3Q 2022 (87,976) coupled with the fact that it appears that SCI paid about $18 million more in interest expense for the quarter than it did in the same quarter of 2022, Net Income increased over 3Q 2022 by a small amount. And, I don’t think that is a small feat considering those obstacles.
Net Income for 3Q 2023 was reported as $122.0 million as compared to Net Income for 3Q 2022 of $120.9 million.
SCI defines “Core” as “services and products delivered or performed through their “core” funeral homes”. Moving forward it is that “Core” funeral home where I think the challenges will eventually come.
If you look at the “Comparable funeral preneed sales production” for the quarter you will note that the number of contracts sold this year was more than last year and as noted in the report “Comparable Preneed” grew about $15 million or 4.9% in dollar volume. However, the challenge going forward, in my opinion, is that “Core” contracts sold actually dropped by 1.6% while “Non-funeral home contracts sold” increased by 14.2%.
The average revenue per “Core” contract was $6,439 and the average revenue per “Non-funeral home contract sold” was $3,083. “Non-funeral home contracts sold” are defined by SCI as services sold through non-funeral home channels such as SCI Direct.
That is, in my opinion, what makes the future look so challenging . . . . .the number of “Core” contracts for high revenue going down, while the numbers of “Non-funeral home” contracts for much less revenue per case going up. Again, in my opinion, those preneed figures truly show where the future of the death care client is going. . . and it appears to be continuing towards a lower price alternative to the casketed funeral.
That observation is probably not unique to SCI, however, because SCI is a public company and reports these statistics we get a chance to see the trends in its reports.
SCI also reported in this report that their “Comparable Cremation Rate” has jumped to 63.0% from a year ago’s number of 61.7%.
Disclaimer — The author of this article for Funeral Director Daily holds stock in Service Corporation International.
More news from the world of Death Care:
- Gillum joins ChurchFunerals Direct. Daily Advocate (OH)
- Two in five adults are stressed about funeral costs: Met Life. Cover (United Kingdom)
- Propel Funeral shares climb as corporate bidders try their luck. The Motley Fool
- Bobby Storey cremation row cost Belfast City Council almost US $ 125k. BBC News (Great Britain)
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